JPMorgan Chase CEO explains big loss

1of6JPMorgan Chase CEO Jamie Dimon, head of the largest bank in the U.S., arrives to testify on Capitol Hill in Washington, Wednesday, June 13, 2012, before the Senate Banking Committee, about how his company recently lost more than $2 billion on risky trades and whether its executives failed to properly manage those risks. (AP Photo/Haraz N. Ghanbari)Photo: Haraz N. Ghanbari

2of6JPMorgan Chase CEO Jamie Dimon, head of the largest bank in the U.S., arrives to testify on Capitol Hill in Washington, Wednesday, June 13, 2012, before the Senate Banking Committee, about how his company recently lost more than $2 billion on risky trades and whether its executives failed to properly manage those risks. (AP Photo/Haraz N. Ghanbari)Photo: Haraz N. Ghanbari

3of6JPMorgan Chase CEO Jamie Dimon, head of the largest bank in the US, testifies on Capitol Hill in Washington, Wednesday, June 13, 2012, before the Senate Banking Committee about on how his company recently lost more than $2 billion on risky trades and whether its executives failed to properly manage those risks. (AP Photo/Haraz N. Ghanbari)Photo: Haraz N. Ghanbari

4of6JPMorgan Chase CEO Jamie Dimon, head of the largest bank in the US, testifies on Capitol Hill in Washington, Wednesday, June 13, 2012, before the Senate Banking Committee about on how his company recently lost more than $2 billion on risky trades and whether its executives failed to properly manage those risks. (AP Photo/Haraz N. Ghanbari)Photo: Haraz N. Ghanbari

5of6Jamie Dimon, chief executive of JPMorgan Chase, is the focus of a media maelstrom Wednesday prior to testifying before the Senate Banking Committee on Capitol Hill in Washington.Photo: DANIEL ROSENBAUM

WASHINGTON - JPMorgan Chase chief executive Jamie Dimon faced a reckoning in Congress on Wednesday, learning that emotions in Washington are still raw four years after the financial crisis and that politicians are still hotly debating the government's response.

An apology

He apologized for the bank's $2 billion or more in trading losses last month, saying they were the result of an errant strategy at a unit that was supposed to reduce risk. He said the bank may take back some of the payments made to employees involved in the strategy. Among the most likely candidates would be Ina Drew, JPMorgan's chief investment officer, who left the bank days after Dimon disclosed the loss on May 10.

Some on the Senate Banking Committee demanded more. "When those bets go bad, instead of taking responsibility for it, you blame it on the unit that you set up?" asked Sen. Jeff Merkley, D-Ore.

"We made a mistake. I am absolutely responsible," Dimon said. "The buck stops with me."

However, Sen. Jim DeMint, R-S.C., told Dimon sympathetically that Congress manages to lose at least $2 billion every day. Referring to the bank, he said: "You appear to be in much better fiscal shape than we are as a country."

Once close to Obama

A Democrat once close to the White House - President Barack Obama called him one of the "smartest bankers" a few weeks ago - Dimon has become one of the harshest critics of the overhaul of financial regulation, known as Dodd-Frank.

But as JPMorgan's big loss renewed pressure for greater oversight of Wall Street, Dimon has silenced his usually fiery critique of Washington intervention. On Wednesday, Republicans pushed him to blast it again. Dimon was reluctant.

Democrats were quick to remind Dimon that they had enacted the overhaul because banks had gotten themselves into such a mess in 2008. Democrats are pushing for a tough interpretion of the Dodd-Frank law.

After Dimon told lawmakers that JPMorgan had a "fortress balance sheet" despite the loss, Sen. Robert Menendez, D-N.J., told him he was playing "Russian roulette." He added, "I'd like to remind you that fortress balance sheet has a moat that was dug by taxpayers to the tune of $25 billion in bailout money and more than $450 billion in loans from the Fed."

Menendez was referring to the Bush administration's investments in major banks as part of the Troubled Assets Relief Program in 2008, as well as emergency Fed lending to banks during the crisis.

Even though it was the topic of the discussion, Dimon gave relatively few new details about what had transpired in the bank's Chief Investment Office. The Justice Department is looking into the matter.

He said the office, which invests $350 billion as part of what is supposed to be a "conservative" strategy, had a portfolio of highly complex investments that are supposed to guard the overall firm from major risks such as the financial crisis in Europe.

But he said the strategy was "not carefully analyzed." The Wall Street Journal reported that some senior JPMorgan executives were told about risky trading two years before the losses came to light.